Private investments vital to global infrastructure demand: bank head
The China-backed Asian Infrastructure Investment Bank (AIIB) will encourage more participation from the private sector while focusing on quality in selecting potential projects, the bank's president said over the weekend.
Six months after its inauguration, the AIIB has begun to deliver on its commitments, approving its first four projects worth $509 million in Bangladesh, Pakistan, Tajikistan and Indonesia, Jin Liqun, AIIB president, told a press conference on Saturday at the bank's first annual meeting in Beijing.
During the bank's establishment process, our members expressed "the need for concessional resources," to help them prepare strong and bankable projects, Jin said, noting that the bank's board of governors approved on Friday the establishment of a special fund for technical assistance to projects, and the Chinese government contributed $50 million to the fund.
The AIIB, one of the multilateral development banks (MDBs), has vowed to support infrastructure development and regional connectivity in Asia.
During the first six months, Jin said the bank has set up three specific requirements for financing projects. These are financially sustainability, environmental friendliness and social acceptability. "We have set very high standards to reach our target," Jin noted.
The bank is expected to lend approximately $1.2 billion in 2016, the president told the board on Saturday. And the first batch of projects are largely to be co-financed with other MDBs, namely, the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD) and the World Bank.
Private sector's role
Despite the global economic slowdown and individual country uncertainties, developing infrastructure is needed to make ends meet, said Woochong Um, ADB Office Secretary. "The challenge for us, for the World Bank and the AIIB is to develop good projects," Um told the Global Times on Saturday. He noted that project development is an area MDBs have to focus on, but also on specific project development to make them bankable. By providing quality projects, private investor skepticism would be reduced as well, Um said.
The ADB is not the only MDB which has focused on developing a different financing modality by drawing in more private investments during the panel discussions on Sunday, which was part of the activities of the AIIB's first annual meeting.
In the coming years, the AIIB looks to take its place as one of the leading multilateral financial institutions for cutting edge infrastructure investments and as "a pacesetter for Public-Private Partnerships (PPP)," Jin said on Saturday.
There are different ways of working with the private sector, including the PPP and co-financing schemes, Jin said. "We can also provide loans to a private company if it's involved in developing basic infrastructure," Jin told the Global Times at the press conference.
He also highlighted the importance of encouraging the private sector to directly invest in infrastructure projects.
The need for infrastructure worldwide is huge, which is measured in trillions of dollars, but the available resources of MDBs are only in the billions, "so the private sector's involvement is crucial to cope with the need," Pierre Egide Gramegna, Luxembourg's finance minister, told the Global Times on Sunday.
Gramegna added that the European Investment Bank is offering "a system of guarantees" so private investors will be encouraged to take part in projects, as a public institution will largely shoulder the risks, which could be an example for other MDBs.
MDBs are helping markets become more private-sector friendly, said Chris Heathcote, CEO of Sydney-based nonprofit development organization Global Infrastructure Hub.
"Over time, the private sector will be able to take over the burden of providing financing, but it's necessary for countries to be prepared for this to work," he told the Global Times Sunday.
